PwC Malta has welcomed some of the provisions of the updated Basel proposals, explaining that they would help smaller banks.

For the most part, the European Commission’s proposals seek to implement the Basel III proposals with only limited differences in scope, timing and calibration, together with the first parts of what the banking industry community refers to as Basel IV.  With this update, the Commission is also introducing the concept of ‘proportionality’, so reporting and compliance burdens would be simplified for Europe’s smaller, less risky banks.

Fabio Axisa, banking and capital markets leader at PwC Malta, said: “Europe’s move to implement ‘proportionality’ is an important step, especially for the large number of smaller institutions in the EU, including those in Malta.  This should decrease part of the regulatory burden that smaller banks have been facing.”

The new rules, which are subject to further discussions with the EU Parliament and Council, include the introduction of a minimum leverage ratio (of three per cent), as well as a binding liquidity requirement to ensure stable funding of banks’ activities (a Net Stable Funding Ratio), both of which would take effect in 2019.

Of the so-called ‘Basel IV’ rules set, the EU is planning to implement new capital and margin rules covering derivatives and market risks inherent in banks’ trading activities.